EU seems to have US IT companies in its sights

Stan Beer
Wednesday, 12 July 2006 18:13

Opinion and Analysis

The latest news that the European Commission has fined Microsoft US$357 million for failing to comply with an antitrust order to diminish its Windows monopoly would appear to be a sign that EU regulators and those of their member countries appear to be losing the plot.

Since the EC's initial crackdown in 2004 , Microsoft has been ordered to sell a version of Windows without a media player and to license information to rivals about Windows network communications and also received a massive EU497 million fine, which Microsoft is appealing. On the network order, Microsoft claims to have done its best to comply with the order.

Meanwhile, Microsoft is spending massive resources to comply with the EC order.

While Microsoft has its problems, Apple has woes of its own, having fallen afoul of French and Scandinavian regulators over its exclusive iPod and iTunes symbiosis. One suspects that the EC may not be far behind based on its track record so far.

Whatever one might think of Microsoft, or for that matter Apple, both companies created their phenomenal successes and dominant market position by creating unique business models that competitors were unable to match. Microsoft created a desktop PC model that marginalised Apple and other competitors, while Apple has created a combination online and portable music player model that has marginalisd other MP3 player makers.

While Microsoft and Apple both have dominant market positions, neither are unassailable. Microsoft is under threat from open source competitors and is being beaten black and blue by Google in the internet space. Apple can expect stiff competition from Microsoft and other competitors in the music downloads and portable music players business as they increasingly adopt its business model. Both companies built their market positions in the face of stiff competition.

For the some reason EU regulators believe that iconic US IT companies such as Microsoft and Apple that have developed superior business models and go to market strategies should simply hand over their intellectual property to their competitors and sacrifice market share so their competition can road their coat tails to success. The argument that such domination stifles creativity is rubbish. In fact, the opposite is the case, Microsoft's domination of the desktop encouraged Google to create a new paradigm to circumvent the desktop. It encouraged the creation of the open source business model.

If France and the EU want an analogy of what may happen if they paint Microsoft and Apple into a corner, they can look to India of 30 years ago. Back then, the subcontinent had a highly protectionist mindset. The Government of the day tried to force Coca Cola to reveal its secret formula to local companies. Coke refused and left the country. Subsequently, a number of inferior local substitutes were produced which nobody liked. Finding a genuine bottle of Coke was like finding gold. Hopefully, finding a decent online music service in France will not one day be just as difficult.